Star Wars: The rise of the SpaceX mini-constellation

Happy Monday! I hope everyone had a great Easter! Last week I had a conversation on stage about Deep Technology and how few companies really qualify as such. Today I bring a great example of Deep Tech (Frontier Tech) courtesy of SpaceX. It’s a thrilling space with myriad opportunities for new entrants to develop amazing innovations. I hope you enjoy Space!

In 2015, Elon Musk announced the creation of project StarLink. The goal is to build a satellite broadband network that offers fiber-like access from anywhere in the world.

To achieve this, they plan to launch 4425 minisatellites and build the largest Low Earth Orbit (LEO) constellation to date. Just to put this into perspective, according to the Index of Objects Launched into Outer Space in 2017 there where 4635 satellites in orbit around Earth. That’s an increase of 8.91% compared to 2016. SpaceX intends to double that total in less than six years.

Musk isn’t chasing a crazy dream though. There are existing satellite providers like Iridium or Intelsat. However, both networks rely on old and bulky technology. Some, like Intelsat, orbit in high altitude geostationary orbit (~36.000 km). It gives them much larger coverture of the planet’s surface but adds massive latency problems. These networks are suitable for non-critical connections, but not for low-latency ones. On the other hand, systems like Iridium went for Low Earth Orbits. The massive costs of launching and building the satellites, though, restricted how many they could put in orbit (66). A smaller network reduced their coverage and translated into low bandwidth and speeds.

SpaceX FCC fillings

New manufacturing processes are enabling the construction of much smaller and cheaper satellites. Cheaper satellites are more accessible to put into orbit and populate the LEO and VLEO (Very Low Earth Orbit) with a large mesh of next-generation satellites. This mesh can deliver under 50ms latency performance.

SpaceX isn’t the only one racing towards that objective. There are at least four other organizations in the game, OneWeb, Boeing, Leosat and the Chinese-sponsored Hongyan.

What interests me, isn’t the news per se, but the strategic reasons for it. There has always been an interest in dominating space communications. However, SpaceX’s speed and structural advantages are putting pressure on the industry.

Musk’s approach to space domination is a perfect example of vertical integration. I mentioned before that when entering a nascent market, the best strategy is always one of verticalization. Owning the whole stack gives the entrant significant advantages.

SpaceX is doing just that. They’re integrating the whole stack, from rocket launcher (Falcon 9) to satellite constellation. They’re developing all technologies in-house, giving them a speed and cost edge.

Meanwhile, their closest competitors, OneWeb are following a horizontal integration strategy. They’re working with different partners, including Airbus, to deliver on several elements of the system. While it’s not a bad strategy when competition is fierce, it first requires some traction. Going for a horizontal approach when there is still no market, is not a wise move.

But why fight for satellite broadband? SpaceX is looking for a lucrative market to finance their end goal of Mars colonization. Building space communication capabilities is a must for them. In the process though, they can also outsmart all terrestrial and space broadband operators and make a massive profit.

While these reasons seem very altruistic, the truth is that the strategic value of owning a global communication network is massive.

Who wins with a global satellite broadband network?

There are some distinct strategic scenarios. The most straightforward one is competing with the current terrestrial operators.

Being able to compete, not only on speed but on latency and network coverage, is massive. I have no doubt FCC Chairman Ajit Pai is looking for increase innovation in that space.

The FCC is currently examining additional applications for the operation of NGSO FSS constellations, most of which include large numbers of satellites,” the agency said. “With today’s action, the Commission facilitates greater broadband offerings and competition in the United States.”

An essential advantage of a LEO satellite network, apart from global coverage, is long-distance latency. Communication between the satellites and ground stations is done via radio. However, SpaceX’s proposed satellite to satellite communication is done via optic links. This enables the creation of a high-speed low-latency space mesh network. This mesh can span 7846 km between nodes, allowing for a drastic reduction of the number of routers data has to go through. In other words, terrestrial long-distance connections (Europe to Singapore for example), might go through 10 routers and take 200 ms. Space long-distance connections will go through three routers (minisatellites) in under 50 ms.

The gain is more than considerable and it’s the chief competitive advantage Musk is after. Such an infrastructure would enable SpaceX to route part of the Internet’s long-distance traffic through their network.

“The goal will be to have the majority of long-distance Internet traffic go over this network and about 10% of local consumer and business traffic. So that’s, still probably 90% of people’s local access will still come from fiber but we’ll do about 10% business to consumer direct and more than half of the long-distance traffic.”

Beyond competing with Internet providers, it could enable strategic low-latency network for crucial businesses. Google, which is one of the leading investors behind SpaceX, is one that comes to mind. They already run their dedicated terrestrial fiber optics network. Having access to a space network would entrench their competitive position and enable them to have a massive advantage. Imagine the creation of a Space Content Delivery Network. Imagine the leverage YouTube might acquire with such infrastructure.

That’s if terrestrial operators don’t innovate and improve their networks. Musk isn’t discarding this option, and he acknowledges that the risk is real.

“One of the mistakes that Teledesic made was not assuming that terrestrial networks would get much better over time. So we need to make sure that the system we design is good, even taking into account significant improvements in the terrestrial systems, but I do think there’s an important difference between what we’re doing and say Teledesic.“

Here are where things get interesting. As I stated before, there are several players in the field. One of them is China government’s Hongyan 300 minisatellite constellation.

While they’re still behind SpaceX, both regarding deployment and satellite fleet size, they have a powerful ally, the Chinese government. China’s goal isn’t financial return, but world domination. This is well aligned with their “One Belt One Road” (OBOR) initiative, and they’ll invest until they win.

"In fact, it can be argued that gaining positive ROI is not the end goal of China’s space program but primarily the projection and increase of its power and influence across the globe. The side effect of this is to potentially undermine the value proposition of Western players that go by traditional market rules and strategies, specifically in the Eurasian, African and Latin American regions as well as other low-income countries that cannot afford high-speed connections.”

On top of being a state-sponsored operation, they also have a technology advantage. China has the only Quantum Communication satellite in existence. The development of Quantum communications can be a deal breaker for SpaceX. Quantum technology could deliver instantaneous transmissions between thousands of kilometers.

The technology is still experimental, but the rate of advancement is drastic. It wouldn’t surprise me to see functional Quantum transmissions happening in the next five years. Let’s remember that five years is still short term. Most Mini satellite constellations will take 6 - 7 years to fully deploy.

Worth noting that China isn’t the only one investing in Quantum. South Korea is also investing in this space and recently acquired ID Quantique (IDQ), one of the most advanced companies in the field.

Potential disrupted industries

Broadband satellite networks won’t only disrupt telecommunication providers. It will affect many sectors. One that will be hit the most is the logistics industry.

Access to global tracking capabilities will supercharge cargo tracking. It will bring a new dimension to all IoT projects build around that space. From ship container tracking to aircraft location and maritime commercial lanes control. This space is already seeing increased activity from China and their “One Belt One Road” (OBOR) initiative. Investment in real-time high-bandwidth logistic applications built on top of the satellite mesh will be a no-brainer.

Another obvious winner would be autonomous fleet operators. The field is growing exponentially and is if anything, data heavy. As this space evolves and fleet managers start deploying vehicles and robots to distant locations, the need for enhanced data-heavy links will increase.

CBInsights CVC Report 2017

CBInsights CVC Report 2017

In this regard, SpaceX holds a strategic position. The fact that SpaceX has access to Tesla and SolarCity technology is a significant advantage. It allows for tremendous vertical integration of the stack.

Tesla vehicles will come with satellite antennas for global data links. Such move will create an initial foothold for StarLink’s service. At the same time, it gives Tesla a significant advantage in their industry. If that wasn’t enough, Tesla’s solar roofs (SolarCity tech), could also be outfitted with StarLink receptors. These autonomous units could power many remote areas, expanding both Tesla’s and SpaceX’s business.

Another industry that could see disruption are networking equipment makers. New satellite entrants might displace companies like Qualcomm, Broadcom, Intel, Huawei or Cisco. Broadcom already tried to sue SpaceX for poaching some of their top experts. I wouldn’t be surprised to see the rise of a new crop of disruptive satellite equipment companies like Kymeta, Mynaric or Isotropic Systems.

Many other fields would be affected by this. An interesting one is Education. Global Internet access at affordable prices (big hypothesis), would enable increased education in developing countries. Better education leads to better living standards. But this change could also upset the rule of many authoritarian regimes. The geopolitical implications of the long-term can’t be ignored.

Censorship and antitrust

The impact of such networks will be drastic and can generate major issues at a political and regulatory level. On the one hand, it can enable citizens to bypass state censorships. Governments have control of their physical boundaries, but not of the sky. Individuals might install ground antennas and link to the global satellite network and bypass any local monopoly. This though has prominent political implications.

“Then there’s the - whether it’s legal to have a ground link. Obviously, any given country can say it’s illegal to have a ground link. From our standpoint, we could conceivably continue to broadcast, and they’d have a choice of either shooting our satellites down.. or not. China can do that. So we probably shouldn’t broadcast there. If they get upset with us, they can blow our satellites up. I mean, I’m hopeful that we can structure agreements with various countries to allow communication with their citizens, but it is on a country by country basis.”

Another risk is that of monopoly or oligopolies. With two or three viable competitors in this space, one has to wonder who or how would it be regulated. So far FCC is on top of it in the US, but with a global reach, there is no protection in other regions like Africa or South America.

Deep Tech opportunities

Despite all these things, the field is opening massive opportunities. There are, still many problems to be solved that startups and investors can dig into.

Ground links

The whole ground link connection can generate many opportunities. SpaceX has mentioned that they’re working on a phased array antenna, but there are other ways to create that link. From Kymeta’s holographic technology to Mynaric’s laser tracking tech.

I also wonder who will be capable of making technology that allows for drastic miniaturization. This could enable the incorporation of ground links within smartphones. So far this is considered impossible, but it’s an exciting space for research.

Innovative manufacturing processes are also vital to the industry. New materials and new ways of building both, satellites and rockets are critical. 3D printing and assembling will be pivotal in the space and it’s no surprise to see important investments happening.

“People in the space industry have a tough time manufacturing things. They’re pretty good at designing them in the first place, but they don’t actually know how to make them in volume.“

Another apparent field is how to place those satellites into orbit. SpaceX achieved a major step with the Falcon 9. As of 2016, SpaceX was pricing 2719 dollars per kilogram of LEO satellite. Musk’s goal is to hit the 1100 dollars per kilogram soon.

Falcon 9 Launch outcomes. Source: Wikipedia.

Falcon 9 Booster landings. Source: Wikipedia.

Meanwhile, many others are trying to lower the cost of launching objects to space. Some are focusing on micro or nanosatellites payloads (i.e., PLD Space), others are researching new solid fuels and others like SpinLaunch are attempting utterly unique launching methods like spinning catapults.

Launch systems by country. Source: Wikipedia

Satellite to Satellite communication

As the LEO and VLEO mesh start growing and traffic starts flowing through their backbone, satellite to satellite communications will become critical. So far, most systems used radio links for ground and satellite to satellite communication. SpaceX though has said theirs will employ optic links for space.

One interesting option is Quantum communication between the satellites. The technology is still a little far away, but I expect it to become the next generation tech used in space communications.

Satellite defense

A field that will become very attractive is satellite defense technology. Just like with drones, satellites will need disabling and protection. With LEO and VLEO becoming a crowded space and political, commercial and regulatory issues at stake, being able to disrupt and protect satellites will become critical.

New technologies for Satellite to Satellite (S2S) disruption, Satellite to Ground (S2G) disruption, full satellite disabling and debris protection will emerge in coming years, if not earlier.

From crazy to doable

I must confess that I find this space of Frontier Tech fascinating. We’ve gone from crazy research that was only accessible to a government-funded organization like NASA, to commercial companies and VCs funding startups in the field.

These startups require advance research, but it’s suddenly becoming fundable and realistic to launch a project in this space. I expect more companies to get involved in the industry, either by building satellite-powered applications or propelling their satellite technology.

For once, this is real Deep Technology that has the potential to change billions of lives and deliver those retarded animojis even to the poles.